Fonterra's board, dealing with internal division and growing farmer unease about governance, has criticised two shareholders for presenting a resolution seeking to cement farmer representation on the board to next month's annual meeting.

In a notice of annual meeting posted on the NZX, the board - introducing a constitutional amendments proposal from shareholder and former Federated Farmers dairy leader Lachlan McKenzie - said it did not support the proposals and recommends shareholders vote against them.

"In addition the board would like to register its disappointment that the co-operative's governance structure, philosophy and culture have not been followed in putting these proposals forward," the notice said.

McKenzie's resolution, supported by South Island shareholder Ann Jones, proposes enshrining in Fonterra's constitution a minimum of nine farmer-elected directors on the board, and that only farmer directors can elect the chairman.

The Fonterra Shareholders Council, which represents the interests of Fonterra's 10,500 farmer-owners, also does not support the resolution, saying it pre-empts a governance review under way at New Zealand's biggest company.

McKenzie said the notice comment was "the board trying to stifle debate".

"Part of the democratic process in a co-operative is active shareholder engagement and active debate. The board is criticising me instead of saying it is a good idea or not."

Fonterra's legal counsel David Matthews said the board meant that Fonterra as a cooperative had a "well-resourced" structure in place to receive, discuss, analyse and consult on shareholder concerns. This was the shareholder council, which represented the interests of 10,500 farmers. The council is funded by farmers.

"If everyone put forward their resolutions (outside the council) it could have a potentially chaotic outcome.

"It's really important (for the cooperative) to work through the impacts of these things and have proper analysis and consultation."

The board also wrote the McKenzie proposal pre-empts the governance and representation review, and had "not been well thought through" and was not in the best interests of the co-operative.

The joint company-council review was started at least six months ago.

The notice of meeting says if any constitutional changes are recommended from the review, farmers will be "fully considered" and changes would require support from 50 per cent of the council, and 75 per cent farmer-shareholder voting support.

McKenzie and Jones' proposals follow a more than two year bruising debate in the co-operative over the introduction of share trading among farmers (TAF), which was narrowly voted in by farmers in June.

TAF involves units in Fonterra shares being offered to the public and listed on the NZX and ASX, sparking fears among some farmers that it is the first step to loss of farmer control of the company. The price of the units and their allocation will be announced by the board today after an institutional offer and book build.

The annual meeting is on December 17 at Hamilton

UNEASE

Meanwhile, Fonterra chairman-elect John Wilson says he has "no idea" if his chances of re-election as a director next month are being eroded amid claims of growing farmer unease about governance standards at the dairy giant.

Farmer-director Wilson is seeking re-election to the board along with fellow incumbent Nicola Shadbolt, and nine other farmer candidates vying for three board seats at New Zealand's biggest company.

Wilson, a Waikato farmer, was recently named by the board as successor to chairman Sir Henry van der Heyden. It is now widely known among shareholders of the farmer-owned co-operative that the vote was not unanimous and that not all Fonterra's nine farmer-elected directors supported Wilson.

The third vacancy in next month's election was created when farmer-director Colin Armer quit after Wilson was announced as chairman-elect.

Wilson's election came as the co-operative was still licking its wounds after a bruising debate over the van der Heyden-driven introduction of TAF.

Then came the news that van der Heyden would stay on the board for an unspecified time, and that a governance review was under way. Opponents of TAF see another threat to farmer control in the review, with one option being the reduction of farmer directors and an increase in independent appointed governors.

Wilson confirmed he attended a meeting of shareholders in Ashburton last week where concerns about governance dominated. It is understood farmers demanded a date when van der Heyden would step down.

Wilson said he would not discuss a farmer meeting, and would not comment on his understanding of the level of concern about current governance.

Asked if he believed shareholder unease would affect his votes, he said he had "no idea" and it was "not an issue for me".

"The board has made the best decisions for the co-operative."

Fonterra's explanation for van der Heyden and independent director Ralph Waters staying on after next month's annual meeting was "continuity" - there was potential for five new directors when the ink was barely dry on TAF.

Units in a new $500 million Fonterra unit trust fund will list on the NZX and ASX on Friday.

The sharemarket bookbuild and institutional offer launched yesterday and continues today. Pricing and allocations will be announced today.

Wilson said while the board had "absolute confidence" it had TAF and its mechanics right after four years of work, the capital restructure was unique.

"There might be something unforeseen so experience is critical. All the directors after a huge amount of due diligence have signed the prospectus and have personal and collective responsibility.

"It is best to have as many directors having signed the prospectus there as TAF goes forward."

Wilson said the May board meeting was likely to be van der Heyden's last, and Waters would probably be replaced within six months.

"This is exactly the right thing to do. It's an absolute no-brainer. This is very clear and farmers understand it," Wilson said. "This is a non-issue and those who say a chairman shouldn't stay on a board . . . there are many examples where chairmen stay on. Every situation is different, every situation is unique. It's doing what is best for the company."